Realty, metal stocks lead decline

Fears of a slowdown in global growth spooked equity and commodity markets across the globe, with Indian stocks being no exception. Nevertheless, the 50-unit S&P CNX Nifty found support at the 5,500 level after falling below that mark in intraday trade. There was no panic on the domestic bourses as some side counters rallied. But, intraday volatility was high as traders rolled over positions in the derivatives segment from the August 2010 series to the September 2010 series ahead of the expiry of the near-month August 2010 contracts on Thursday, 26 August 2010.



The BSE 30-share Sensex was down 97.76 points or 0.53%, off close to 140 points from the day's high and up close to 50 from the day's low. The market breadth was weak in contrast with a strong breadth at the onset of the trading session. Metal stocks were the worst hit in today's market fall. Banking stocks displayed mixed trend in volatile trade with shares of associate banks of State Bank of India (SBI) surging for the second running day on reports of a possible merger with the parent. HDFC Bank recovered from lower level. But, realty shares declined on profit booking.

The market was volatile. Stocks nudged higher in early trade on data showing sustained buying by foreign funds. The market soon lost ground. The Sensex hit a fresh intraday low in morning trade. The market came off lows in mid-morning trade. The market hit a fresh intraday low in early afternoon trade. It came of the lows later. The market recovered from lower level in early afternoon trade after hitting a fresh intraday low.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was down 0.88% at 16.99. India VIX is calculated based on the S&P CNX Nifty options prices. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days.

The Reserve Bank of India (RBI) said in its annual report for 2009-2010 released today, 24 August 2010, that the relative price variability has declined since November 2009 despite inflation remaining high, which indicates that the inflation has become increasingly generalised, and hence, requiring appropriate monetary policy actions to anchor inflation expectations. Persistent large fiscal deficit has several adverse macroeconomic risks, ranging from higher inflation to lower savings, crowding-out pressures on private investment, decline in potential output, and worsening of external imbalances, the RBI said in the report.

In a globalised world, a congenial global economic environment and a sustainable balance of payments position are critical for achieving the policy goal of stable growth, the RBI said in the annual report. Despite lower trade deficit, the decline in invisibles surplus led to a higher current account deficit of 2.9% of GDP during 2009-10 as compared with 2.4% of GDP a year ago. A higher current account deficit led to stronger absorption of foreign capital, the RBI said.

Given the stronger growth outlook of India and the probability of monetary exit being delayed by the advanced economies, capital inflows could be expected to accelerate, which will have to be managed, as in the past, the central bank said. The government's borrowing programme for 2010-11 has to be managed, keeping in view the pressure on yield from the elevated inflation, gradual withdrawal of excess liquidity and stronger pick-up in the private sector credit demand, the RBI said.

Going forward, as the monetary position is normalised, addressing structural constraints in several critical sectors is necessary to sustain growth and also contain supply side risks to inflation. The Reserve Bank of India has stated its commitment to containing inflation through its calibrated monetary policy normalisation, with clarity on the direction of the policy rates in the near-term as well as timely actions in cautious steps based on careful assessment of risks to both inflation and growth.

Trade Secretary Rahul Khullar today, 24 August 2010, said India's trade deficit for the current fiscal year that ends in March 2011 is expected to be at least $120 billion. Any deficit of the order of $120 billion is serious, but as long as it does not go over the top it can be financed, Khullar said. The trade deficit for July 2010 is seen at $12.93 billion.

European stocks traded lower Tuesday, 24 August 2010, after a string of poorly received trading updates and as fears over the strength of the US recovery continued to unsettle investors. A weak preliminary reading for the euro-zone's purchasing managers index for August 2010 also weighed on investor sentiments. The key benchmark indices in France, Germany and UK were down by between 0.88% to 1.29%.

Martin Weale, a member of the Bank of England's rate-setting Monetary Policy Committee, warned in a newspaper interview that Britain runs the risk of slipping back into recession. Martin Weale, the newest member of the committee, reportedly said that it would be foolish to rule out the possibility of a double-dip recession.

Meanwhile, the latest economic announcement from Germany on Tuesday confirmed an earlier estimate that the country's economy grew 2.2% in the second quarter -- the strongest quarterly growth since reunification in 1990.

Asian markets fell in choppy trade on Tuesday, 24 August 2010, on concerns about the pace of global economic growth. The key benchmark indices in Japan, South Korea, Indonesia, Taiwan, Singapore and Hong Kong were down by between 0.11% to 1.33%. However, China's Shanghai Composite was up 0.41%.

The Nikkei 225 average fell below the psychological 9,000, led by decline in shares of exporters as the yen hit multi-week highs against the US dollar and the euro. At a news conference, Japanese Finance Minister Yoshihiko Noda warned that disorderly currency moves can be harmful to economic stability.

US stocks fell on Monday, 23 August 2010, despite acquisition offers from companies including Hewlett-Packard as investors remained concerned about the broad economic weakness. The Dow Jones Industrial Average declined 39.21 points, or 0.38%, to 10174.41. The Nasdaq Composite dropped 20.13, or 0.92%, to 2159.63, and the Standard & Poor's 500 index fell 4.33, or 0.40%, to 1067.36.

Trading in US index futures indicated that the Dow could fall 62 points at the opening bell on Tuesday, 24 August 2010.

Among global economic data, investors are keenly awaiting the US home sales report due later in the global day and Friday's (27 August 2010), revised US GDP data.

Closer home, the Indian government on Monday, 23 August 2010, announced a bagful of stimulus measures in the latest review of the Foreign Trade Policy. To spur exports, Commerce and Industry Minister Anand Sharma announced a six-month extension of the Duty Entitlement Pass Book scheme (DEPB). The DEPB, which neutralises the incidence of duties, was supposed to expire on 31 December 2010. It will now expire on 30 June 2011. The additional export incentives will cost the government over Rs 1000 crore, Sharma said.

Coming back to stocks, foreign funds have made heavy purchases of Indian stocks over the past 2-1/2 months. Foreign funds today, 24 August 2010, bought shares worth a net Rs 191.05 crore, as per provisional data from the stock exchanges. Domestic funds dumped shares worth a net Rs 689.54 crore.

Foreign funds have bought equities worth a net Rs 7538.11 crore so far this month, till 24 August 2010, absorbing selling of Rs 3998.89 crore from domestic funds, as per data from the stock exchanges.

Foreign funds had bought shares worth a net Rs 8320.50 crore in July 2010, absorbing selling by domestic institutional investors. Domestic funds sold shares worth a net Rs 6323.13 crore in July 2010.

Foreign funds had pumped in Rs 7713.97 crore in equities in June 2010, absorbing selling by domestic funds in that month. Domestic funds had dumped shares worth a net Rs 4777.05 crore in June 2010.

Amid growing hopes of a bumper kharif harvest thanks to further improvement in monsoon rainfall, worries persist over the unabated poor crop sowing in some parts rain-starved eastern region. Overall, nearly 90% of the total normal kharif acreage has already been seeded till 20 August 2010 and the standing crops are reportedly in good shape. Water status of most reservoirs is also getting better rapidly and is now just three per cent short of normal, reports suggest.

A ray of hope for the drought-hit eastern region has emerged from the India Meteorological Department (IMD) which has predicted widespread showers in eastern Uttar Pradesh, Bihar, sub-Himalayan West Bengal, Sikkim, Assam and Meghalaya in the rest of this month. That will help farmers in this region grow coarse cereals, pulses and fodder.

The cumulative rainfall during the period from 1 June 2010 to 23 August 2010 was 3% below normal. The Southwest monsoon was active over Arunachal Pradesh, Sub-Himalayan West Bengal & Sikkim, Bihar, Uttar Pradesh, Haryana, Chandigarh & Delhi, Himachal Pradesh and Rayalaseema during past 24 hours, the India Meteorological Department (IMD) said in its daily update on Monday, 23 August 2010.

Rainfall over the country as a whole for the second half (August to September) of the 2010 southwest monsoon season is likely to be normal, according to the India Meteorological Department (IMD). Quantitatively, rainfall for the country as a whole during the period August-September 2010 is likely to be 107% of long period average (LPA) with a model error of plus/minus 7%, according to the weather office.

The south west monsoon is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector. The weather office expects this year's monsoon rains to be at 102% of the long-period average. If the southwest monsoon for the June-September monsoon season turns out good and if it is well distributed, it will help raise farm output, boost rural incomes and lower food inflation.

The goods and services tax (GST) may reportedly make a debut on 1 June 2011 (GST) as the government is no mood to delay the ambitious indirect tax reform by another year. Its planned rollout from April next year now looks uncertain due to opposition from BJP-ruled states, which fear an erosion of their fiscal autonomy.

As per reports, the government is going ahead with the preparations so that GST can be rolled out quickly after a political consensus is reached on the architecture of this reform. The constitution amendment bill for the rollout of GST has to be passed by both the houses of Parliament and at least 15 state assemblies. Finance Minister Pranab Mukhejee said last week that he will not introduce the constitutional amendments required for the indirect tax reform in Parliament until there is wide consensus on the matter.

The GST is expected to bring down the incidence of total indirect taxes on goods and services as it prevents levy of tax on tax, or what is called cascading, and would provide for set-off of tax paid on a wider set of inputs including services.

The government is likely to place the bill on the Direct Taxes Code (DTC) in the ongoing Monsoon session of Parliament. The Direct Tax Code (DTC) is being proposed as a replacement for the Income Tax Act, 1961, and is likely to come into effect from 1 April 2011. DTC aims at reducing tax rates, but expanding the tax base by minimising exemptions.

The Union Cabinet on 20 August 2010, cleared a revised version of a Bill to govern civil liability in the event of nuclear damage to push forward the process of increasing the share of atomic power in electricity generation. However, the Nuclear Liability Bill faced fresh roadblocks on Sunday, 22 August 2010, with the Bhartiya Janata Part and the Left parties asserting that they would oppose any dilution of the suppliers' liability.

On the macro front, data on 19 August 2010 showed the primary articles index rose 14.85% in the year to 7 August 2010, lower than previous week's annual rise of 15.66%. The food price index rose 10.35%, lower than previous week's annual rise of 11.4%, as prices of vegetables, potatoes and onions fell. The fuel price index rose 12.57%, lower than previous week's annual rise of 12.66%.

The liquidity situation in the financial markets has improved, a senior Reserve Bank of India (RBI) official said on 20 August 2010. The Reserve Bank of India (RBI) is also keeping a close watch on the liquidity situation, said Janak Raj, an adviser at the RBI's monetary policy division.

Chief Statistician T.C.A. Anant on 19 August 2010 said the headline inflation is expected to ease further in coming months. The headline inflation eased in July 2010, fuelling expectations that the central bank may lessen the scale and pace of increase in interest rates.

Saumitra Chaudhuri, a Planning Commission member in charge of economic development recently said inflation has peaked and would start easing at a faster rate from September 2010. The Reserve Bank of India will undertake a mid-quarter monetary policy review on 16 September 2010, as per the schedule. Finance Minister Pranab Mukherjee said this month rising prices were a cost of rapid economic growth.

Bond yields edged lower today, 24 August 2010. The yield on the most traded, 8.13% 2022 bond was hovering at 7.98%, lower than Monday's (23 August 2010) close of 8.04%. The yield on the second most traded benchmark 10-year 2020 bond was hovering at 8%, slightly lower than from Monday' (23 August 2010) close of 8.01%.

The Reserve Bank of India (RBI) at its Q1 monetary policy on 27 July 2010 raised a key lending rate by 25 basis points to curb surging inflation. With growth taking firm hold, the balance of policy stance has to shift decisively to containing inflation and anchoring inflationary expectations, the RBI said at that time. The RBI also at that time signaled its strong preference for tight liquidity, saying it would ensure that excess liquidity in the system doesn't dilute the effectiveness of policy-rate actions.

India needs to channelise more pension and insurance funds into the infrastructure sector, Finance Minister Pranab Mukherjee said in a government statement released on 18 August 2010. India plans to spend $1.5 trillion between 2007 and 2017 to upgrade its infrastructure to support double-digit economic growth rates.

India's exports in July grew an annual 13.2% to $16.24 billion, Trade Secretary Rahul Khullar said on 17 August 2010, the ninth straight month of expansion. Imports for the month rose 34.3% to $29.17 billion, he said.

The industrial output rose 7.1% in June 2010 compared with revised 11.3% rise in May 2010, the latest data showed. Manufacturing grew 7.3%, mining sector grew 9.5%, consumer goods sector rose 8.3%, capital goods sector expanded 9.7% and electricity generation rose 3.5%.

The industrial production growth rate for May 2010 was revised marginally down to 11.3% from 11.5% reported earlier. The growth rate for March 2010 was revised upward to 14.5% from 13.9% reported earlier.

The BSE 30-share Sensex was down 97.76 points or 0.53% to 18,311.59. The Sensex rose 42.38 points at the day's high of 18,451.73 in early trade. The index fell 148.64 points at the day's low of 18,260.71 in mid-afternoon trade.

The S&P CNX Nifty was down 38.40 points or 0.69% to 5,505.10. It hit a low of 5,488.45 in intraday trade

The BSE Mid-Cap index fell 0.7% and the BSE Small-Cap index fell 0.68%. Both the indices underperformed the Sensex.

Most sectoral indices on BSE declined. The BSE Realty index (down 2.62%), Metal index (down 1.94%), PSU index (down 0.79%), Power index (down 0.78%), IT index (down 0.67%), Capital Goods index (down 0.63%), and Oil & Gas index (down 0.55%), underperformed the Sensex. The BSE Consumer Durables index (up 0.47%), FMCG index (up 0.33%), Healthcare index (up 0.14%), Auto index (down 0.24%), and banking sector index Bankex (down 0.48%), outperformed the Sensex.

The market breadth, indicating the health of the market was weak. The breadth was strong at the onset of the trading session. On BSE, 1777 shares declined while 1217 shares rose. A total of 87 shares remained unchanged.

The total turnover on BSE amounted to Rs 4953 crore, lower than Rs 5677.22 crore on Monday, 23 August 2010.

From the 30-share Sensex pack, 23 stocks declined while the rest of them gained.

Index heavyweight Reliance Industries (RIL) fell 0.44% to Rs 972.15. The stock hit a high of Rs 980.80 and a low of Rs 968.05. Reportedly the legal dispute between RIL and NTPC over D6 gas may be heading for a truce, with Solicitor General Gopal Subramanium recommending that NTPC be given gas at a concessional rate under a provision of the production sharing contract.

India's largest oil exploration firm by sales Oil & Natural Gas Corporation (ONGC) fell 0.81% on reports it has been instructed by the country's oil ministry to study the possibility of making an offer for a stake in Cairn India, countering Vedanta Resources Plc's $9.6 billion bid.

Meanwhile, Commerce and Industry Minister Anand Sharma today said that ONGC should have last word on Vedanta-Cairn India deal.

Shares of Cairn India jumped 3.16%, as a likely bidding war may perk up valuation. Carin India has made an oil and gas discovery in a block, situated in the Krishna-Godavari Basin awarded under the fifth New Exploration Licencing Policy (NELP-V) bidding round. The block is operated by Cairn, with a 49% participating interest. State-run explorer Oil and Natural Gas Corporation (ONGC) holds a majority 51% in this block.

India's largest cellular services provider by sales Bharti Airtel gained 1.64%, extending Monday's (23 August 2010) 2.16% advance. The company has won the rights to sponsor all cricket series played in India until 2013 and will pay $700,000 per match. It was the top gainer from the Sensex pack.

India's second largest cellular services provider by sales Reliance Communications (RCom) advanced 1.22%. RCom during market hours on Friday, 20 August 2010, said it has entered into a pact with Nokia India, in a first-of-its-kind multi-faceted business partnership.

Banking stocks displayed mixed trend in volatile trade. India's largest bank by net profit and branch network State Bank of India (SBI) rose 0.86% to Rs 2846.95, off day's low of Rs 2801.10. On Saturday, 21 August 2010 SBI said it will issue a total of 1,14,606 shares to shareholders of State Bank of Indore, which will be merged with SBI. The minority shareholders of State Bank of Indore will get 34 SBI shares for every 100 State Bank of Indore shares held.

Shares of associate banks of SBI surged for the second running day on reports of a possible merger with the parent. State Bank of Bikaner & Jaipur (up 20%), State Bank of Mysore (up 20%), State Bank of Travancore (up 16.70%), surged. Shares of all these banks had jumped 20% each on Monday, 23 August 2010.

State Bank of Mysore's board meets on 25 August 2010 to decide the record date as well as the ratio and pricing of a proposed rights issue.

Punjab National Bank (down 1.05%), Bank of Baroda (down 2.12%), declined. But, Bank of India rose 0.08%.

India's largest private sector bank by net profit ICICI Bank fell 0.93% to Rs 1000.80 in volatile trade. Earlier, the stock had retreated after striking a 52-week high of Rs 1023. The stock hit a low of Rs 998.

India's second largest private sector bank by net profit HDFC Bank rose 0.49% to Rs 2207.05, recovering from the day's low of Rs 2163.

Metal stocks slumped as LMEX a gauge of six metals traded on the London Metal Exchange fell 0.35% on Monday, 23 August 2010. India's largest non-ferrous metal producer by sales Sterlite Industries lost 3.97% and was the top loser from the Sensex pack.

India's largest private sector aluminium maker by sales Hindalco Industries lost 3.96%, extending a two-day 2.39% fall. The stock today, 24 August 2010, turned ex-dividend for a dividend of Rs 1.35 per share for the year ended March 2010.

Among other metal stocks, National Aluminum Company, Steel Authority of India, Hindustan Zinc, JSW Steel, Tata Steel fell by between 0.03% to 3.85%.

Auto pivotals fell. India's top small care maker by sales Maruti Suzuki India fell 0.92% after the stock turned ex-dividend for a final dividend of Rs 6 per share for the year ended March 2010.

India's top tractor maker by sales Mahindra & Mahindra fell 1.12%. The company recently signed a memorandum of understanding to buy a majority stake in troubled South Korean automaker Ssangyong. The announcement was made before trading hours on Monday, 23 August 2010.

India's largest bike maker by sales Hero Honda Motors declined 1.71%

India's top truck maker by sales Tata Motors slipped 0.47%. As per recent reports, the company plans to raise $700-750 million through issue of shares with differential voting rights to retire debt.

India's top cigarette maker by sales ITC rose 0.35%, halting a two-day 3.42% fall, on bargain hunting.

Shares of software exporters were mixed. India's second largest software services exporter by sales Infosys declined 0.96% and India's third largest software services exporter by sales Wipro fell 0.84%. But, India's largest software services exporter by sales TCS advanced 0.18%.

Realty shares declined on profit booking. DLF, HDIL, Orbit Corporation, Unitech, Parsvnath Developers, Indiabulls Real Estate fell by between 0.32% to 3.54%..

Capital goods stocks also fell on profit taking. BEML, Bharat Heavy Electricals, Larsen & Toubro, SKF India fell by between 0.31% to 1.95%.

Cals Refineries clocked the highest volume of 3.23 crore shares on BSE. Birla Cotsyn (1.39 crore shares), Spel Semiconductors (1.06 crore shares), FCS Software (86.17 lakh shares) and Ispat Industries (78.61 lakh shares) were the other volume toppers in that order.

Midfield Industries clocked the highest turnover of Rs 170.27 crore on BSE. State Bank of India (Rs 131.41 crore), Cairn India (Rs 125.59 crore), Jindal Poly Films (Rs 124.82 crore) and State Bank of Travancore (Rs 120.87 crore) were the other turnover toppers in that order.

Top gainers in BSE's A group were Religare Enterprises (up 8.42%), PTC India (up 4.34%), Castrol India (up 4.18%), Piramal Healthcare (up 3.96%), Opto Circuits (up 3.59%), and EIH (up 3.2%).